What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-02-24 compared with 2020-02-20 · 329 added, 311 removed, 754 unchanged (46% of the section changed)

6 unchanged sentences

In addition, for U.S.

federal income tax purposes, we have elected to be treated, and intend to qualify annually, as a regulated investment company (RIC) under Subchapter M of the Internal Revenue Code of

1986, as amended (the Code).

federal income tax purposes, the Company has elected to be treated, and intends to qualify annually, as a regulated investment company (RIC) under Subchapter M of the Internal Revenue

Code of 1986, as amended (the Code).

In February 2010, we completed our initial public offering and a concurrent private

32 unchanged sentences

During the fiscal year ended December 31, 2020,

we invested approximately $404 million in over 50 portfolio companies.

we invested approximately $427 million in 40 portfolio companies.

Investments sold or prepaid during the fiscal year ended December 31, 2020 totaled approximately $363 million.

11 unchanged sentences

investment team led by Messrs.

Gross and Spohler has invested approximately $9.0 billion in more than 390 different portfolio companies involving approximately 200 different financial sponsors.

Gross and Spohler has invested approximately $10.0 billion in more than 400 different portfolio companies involving over 200 different financial sponsors.

As of February 22, 2021, Mr.

34 unchanged sentences

leveraged credit markets throughout their careers.

They have effectively managed portfolios of distressed and mezzanine debt as well as other investment types.

The depth of their prior experience and credit market expertise has led them through

various stages of the economic cycle as well as several market disruptions.

They have effectively managed portfolios of senior secured, distressed and mezzanine debt as well as other investment types.

The depth of their prior experience and credit market expertise has led

them through various stages of the economic cycle as well as several market disruptions.

Solar Capital Management

14 unchanged sentences

Market Opportunity

Solar Capital invests primarily in leveraged middle-market companies, including in senior secured loans, stretch-senior loans and to a lesser

extent, unsecured loans and equity securities.

We believe that the size of this market, coupled with leveraged companies need for flexible sources of capital at attractive terms and rates, creates an attractive investment environment for us.

Middle-market companies have faced increasing difficulty in accessing the capital markets.

middle-market companies were formerly able to raise funds by issuing high-yield bonds, we believe this approach to financing has become more difficult in recent years as institutional investors have sought to invest in larger, more liquid offerings.

Solar Capital invests directly and indirectly in leveraged middle-market companies, including in senior secured loans, stretch-senior loans and

to a lesser extent, unsecured loans and equity securities.

We believe that the size of this market, coupled with leveraged companies need for flexible sources of capital at attractive terms and rates, creates an attractive investment

environment for us.

Middle-market companies continue to face increasing difficulty in accessing the capital markets.

many middle-market companies were formerly able to raise funds by issuing high-yield bonds, we believe this approach to financing has become more difficult in recent years as institutional investors have sought to invest in larger, more liquid

In addition, many private finance companies that historically financed their lending and investing activities through securitization transactions have lost that source of funding and reduced lending significantly.

Moreover, consolidation of lenders

and market participants and the illiquid nature of investments have resulted in fewer middle-market lenders and market participants.

Moreover, consolidation

of lenders and market participants and the illiquid nature of investments have resulted in fewer middle-market lenders and market participants.

There is a large pool of uninvested private equity capital likely to seek additional capital to support their

10 unchanged sentences

We believe this is because fewer institutions are able to invest in illiquid asset classes.

Therefore, we believe that there is an attractive opportunity to invest in leveraged middle-market companies, including

in senior secured loans, stretch-senior loans, unitranche loans and to a lesser extent, unsecured loans and equity securities, and that we are well positioned to serve this market.

Therefore, we believe that there is an attractive opportunity to invest in leveraged

middle-market companies, including in senior secured loans, stretch-senior loans, unitranche loans and to a lesser extent, unsecured loans and equity securities, and that we are well positioned to serve this market.

Competitive Advantages and Strategy

We believe that we have the following competitive advantages over other providers of financing to leveraged companies.

believe that we have the following competitive advantages over other providers of financing to leveraged companies.

Management Expertise

Gross has principal management responsibility for Solar Capital Partners, to which he currently dedicates substantially all of his time.

Gross has over 25 years of experience in leveraged finance, private equity and

distressed debt investing.

Spohler, our Co-Chief Executive Officer, Chief Operating Officer and a partner of Solar Capital Partners, has over 25 years of experience in evaluating and executing

leverage finance transactions.

As managing partner, Mr.

Gross has principal management responsibility for Solar Capital Partners, to which he currently

dedicates substantially all of his time.

Gross has over 25 years of experience in leveraged finance, private equity and distressed debt investing.

Spohler, our Co-Chief Executive Officer,

Chief Operating Officer and a partner of Solar Capital Partners, has over 25 years of experience in evaluating and executing leverage finance transactions.

Investment Capacity

The proceeds from our initial public offering and the Concurrent Private Placement, the borrowing capacity under the senior secured credit

facility led by Citibank, N.A.

(the Credit Facility), our $50 million NEFPASS SPV credit facility (the NEFPASS Facility), our $75 million of unsecured senior notes due 2023 (the 2023 Unsecured Notes),

our $150 million of unsecured senior notes due 2022 (the 2022 Unsecured Notes), our $21 million of unsecured senior notes due 2022 (the 2022 Tranche C Notes), our $125 million of unsecured notes due 2024 (the

2024 Unsecured Notes), our $75 million of unsecured notes due 2026 (the 2026 Unsecured Notes) and the expected repayments of existing investments provide us with a substantial amount of capital available for deployment

into new investment opportunities.

We believe we are well positioned for the current marketplace.

from our public offerings and the Concurrent Private Placement, the borrowing capacity under the senior secured credit facility led by Citibank, N.A.

(the Credit Facility), our $50 million NEFPASS SPV credit facility (the

NEFPASS Facility), our $75 million of unsecured senior notes due 2023 (the 2023 Unsecured Notes), our $150 million of unsecured senior notes due 2022 (the 2022 Unsecured Notes), our $21 million of

unsecured senior notes due 2022 (the 2022 Tranche C Notes), our $125 million of unsecured notes due 2024 (the 2024 Unsecured Notes), our $75 million of unsecured notes due 2026 (the 2026 Unsecured

Notes), the available capital at our significant subsidiaries and the expected repayments of existing portfolio company investments provide us with a substantial amount of capital available for deployment into new investment opportunities.

believe we are well positioned for the current marketplace.

Solar Capitals Limited Leverage

As of December 31, 2020, we had total outstanding borrowings of approximately $677.0 million.

Under the provisions of

the 1940 Act, we are permitted to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 150% of gross assets less all liabilities and indebtedness not represented by senior securities,

after each issuance of senior securities.

Under the provisions of the 1940 Act,

we are permitted to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 150% of gross assets less all liabilities and indebtedness not represented by senior securities, after each

issuance of senior securities.

As of December 31, 2020, our asset coverage ratio was 225.9%.

We believe our relatively low level of leverage provides us with a competitive advantage, allowing us to anticipate providing a consistent

distribution to our investors, as proceeds from our investments are available for reinvestment as opposed to being consumed by debt repayment.

We believe our relatively low level of leverage provides us with a competitive advantage as proceeds from our investments are available for

reinvestment as opposed to being consumed by debt repayment.

We may increase our relative level of debt in the future.

However, we do not currently anticipate

operating with a substantial amount of debt relative to our total assets.

However, we do not currently anticipate operating with a substantial amount of debt relative to our total assets.

Proprietary Sourcing and Origination

9 unchanged sentences

We believe Solar Capital Partners senior investment teams broad expertise and ability to draw upon its extensive experience enable

us to identify, assess and structure investments successfully across all levels of a companys capital structure and to manage potential risk and return at all stages of the economic cycle.

The attempt to manage risk does not imply low risk or

While we are subject to significant regulation as a

BDC, we are not subject to many of the regulatory limitations that govern traditional lending institutions such as banks.

As a result, we believe that we can be more flexible than such lending

institutions in selecting and structuring investments, adjusting investment criteria, transaction structures and, in some cases, the types of securities in which we invest.

us to identify, assess and structure investments successfully across all levels of a

companys capital structure and to manage potential risk and return at all stages of the economic cycle.

The attempt to manage risk does not imply low risk or no risk.

While we are subject

to significant regulation as a BDC, we are not subject to many of the regulatory limitations that govern traditional lending institutions such as banks.

As a result, we believe that we can be more flexible than such lending institutions in selecting

and structuring investments, adjusting investment criteria, transaction structures and, in some cases, the types of securities in which we invest.

Emphasis on Achieving Strong Risk-Adjusted Returns

30 unchanged sentences

In addition to senior secured loans, stretch-senior loans and unsecured loans, we may invest a

portion of our portfolio in opportunistic investments, which are not our primary focus, but are intended to enhance our returns to our investors.

These investments may include direct investments in public companies that are not thinly traded and

securities of leveraged companies located in select countries outside of the United States.

The securities that

we invest in are typically rated below investment grade.

Securities rated below investment grade are speculative and are often referred to as leveraged loans, high yield

or junk securities, and may be considered high risk compared to debt instruments that are rated investment grade.

In addition, some of our debt investments will not fully amortize during their lifetime, which means that a

borrower may be unable to payoff its debt due to bankruptcy or other reasons and therefore we may write-off such debt investment prior to its scheduled maturity.

Upon such an occurrence, we may realize a loss

or a substantial amount of unpaid principal and interest due upon maturity.

portion of our portfolio in opportunistic investments, which are not our primary focus, but are intended to enhance our returns

to our investors.

These investments may include direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the

United States.

The securities that we invest in are typically rated below investment grade.

Securities rated below investment grade are speculative and are often referred to as leveraged loans, high yield or junk

securities, and may be considered high risk compared to debt instruments that are rated investment grade.

In addition, some of our debt investments will not fully amortize during their lifetime, which means that a borrower may be unable

to payoff its debt due to bankruptcy or other reasons and therefore we may write-off such debt investment prior to its scheduled maturity.

Upon such an occurrence, we may realize a loss or a substantial amount

of unpaid principal and interest due upon maturity.

We may invest up to 30% of our total assets in such opportunistic investments, including loans issued by non-U.S.

issuers, subject to

compliance with our regulatory obligations as a BDC under the 1940 Act.

We have and will continue to borrow funds to make

As a result, we will be exposed to the risks of leverage, which may be considered a speculative investment technique.

The use of leverage magnifies the potential for loss on amounts invested and therefore increases the risks associated

with investing in our securities.

issuers, subject to compliance with our

regulatory obligations as a BDC under the 1940 Act.

We have and will continue to borrow funds to make investments.

As a result, we

will be exposed to the risks of leverage, which may be considered a speculative investment technique.

The use of leverage magnifies the potential for loss on amounts invested and therefore increases the risks associated with investing in our

In addition, the costs associated with our borrowings, including any increase in management fees payable to our investment adviser, Solar Capital Partners, will be borne by our common stockholders.

4 unchanged sentences

willing to accept a lower interest rate to invest in investment grade loan pools, and we would retain a portion of the equity in the securitized pool of loans.

Moreover, we may acquire investments in the secondary market and, in analyzing such investments, we will employ the same analytical process as

we use for our primary investments.

We may utilize instruments such as forward contracts, currency options and interest rate swaps, caps,

collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates.

Hedging against a decline in the values of our portfolio positions does not

eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline.

However, such hedging can establish other positions designed to gain from those same developments, thereby

offsetting the decline in the value of such portfolio positions.

Moreover, we may acquire investments in the secondary market and, in analyzing such investments, we will employ a substantially similar

analytical process as we use for our primary investments.

We may utilize instruments such as forward contracts, currency options and

interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates.

Hedging against a decline in the values of our

portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline.

However, such hedging can establish other positions designed to gain from those same

developments, thereby offsetting the decline in the value of such portfolio positions.

Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions should increase.

It may not be possible to hedge against an

exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price.

Moreover, for a variety of reasons, we may not seek to establish a perfect correlation

between such hedging instruments and the portfolio holdings being hedged.

It may not be possible to

hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price.

Moreover, for a variety of reasons, we may not seek to establish a perfect

correlation between such hedging instruments and the portfolio holdings being hedged.

Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss.

In addition, it may not be possible to hedge fully or perfectly

against currency fluctuations affecting the value of securities denominated in non-U.S.

currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency

fluctuations.

Our principal focus is to provide senior secured loans and stretch-senior loans to leveraged companies in a variety of

In addition, it may not be possible to hedge fully

or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S.

currencies because the value of those securities is likely to fluctuate as a result of factors not related

to currency fluctuations.

Our principal focus is to provide senior secured loans and stretch-senior loans to leveraged companies in a

variety of industries.

We generally seek to target companies that generate positive cash flows and/or have substantial assets that secure our loans.

We generally seek to invest in companies from the broad variety of industries in which our investment adviser

has direct expertise.

We generally seek to invest in companies from the broad variety of industries in which our

investment adviser has direct expertise.

The following is a representative list of the industries in which we may invest:

Aerospace & Defense

Air Freight & Logistics

Air Freight &

Asset Management

Automobiles

Building Products

Commercial Services & Supplies

Capital Markets

Services & Supplies

Communications Equipment

1 unchanged sentence

Consumer Finance

Containers & Packaging

Containers &

Distributors

Diversified Consumer Services

Diversified Financial Services

Diversified Real Estate Activities

Diversified Financial

Diversified Real

Estate Activities

Diversified Telecommunications Services

Education Services

Energy Equipment & Services

Food Products

Health Care Equipment & Supplies

Energy Equipment &

Health Care

Equipment & Supplies

Health Care Facilities

1 unchanged sentence

Health Care Technology

Hotels, Restaurants & Leisure

Restaurants & Leisure

Household & Personal Products

Industrial Conglomerates

Internet Services & Infrastructure

Leisure Equipment & Products

Internet Services &

Infrastructure

Equipment & Products

Life SciencesTools & Services

Metals & Mining

Multiline Retail

Multi-Sector Holdings

Oil, Gas & Consumer Fuels

Consumable Fuels

Paper & Forest Products

2 unchanged sentences

Professional Services

Research & Consulting Services

Consulting Services

Road & Rail

Specialty Retail

Textiles, Apparel & Luxury Goods

Thrifts & Mortgage Finance

Trading Companies & Distributors

Thrifts & Mortgage

Companies & Distributors

Wireless Telecommunications Services

We may also invest in

other industries if we are presented with attractive opportunities.

We may invest, to the extent permitted by law, in the securities and

instruments of other investment companies, including private funds.

We may also participate in negotiated co-investment transactions with certain affiliates, each of whose investment adviser is Solar Capital

Partners, or an investment adviser controlling, controlled by or under common control with Solar Capital Partners and is registered as an investment adviser under the Advisers Act, in a manner consistent with our investment objective, positions,

policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to the conditions of the exemptive order obtained from the SEC on June 13, 2017 (the New Exemptive Order), which

supersedes the exemptive order that we initially obtained on July 28, 2014 (the Prior Exemptive Order).

Pursuant to the New Exemptive Order, we are permitted to co-invest with our affiliates if a required majority (as defined in

Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the

potential co-investment transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on

the part of any person concerned, and (2) the potential co-investment transaction is consistent with the interests of our stockholders and is consistent with our then-current investment

objective and strategies.

At December 31, 2019, our portfolio consisted of 108 portfolio companies and was invested 31.0% in cash

flow senior secured loans, 28.2% in asset-based senior secured loans / Crystal Financial LLC (Crystal), 21.5% in equipment senior secured financings / NEF Holdings, LLC (NEF), and 19.3% in life science senior secured loans,

in each case, measured at fair value.

We expect that our portfolio will continue to include primarily senior secured, stretch-senior, financing leases and to a lesser extent, unsecured loans and equity securities.

In addition, we also expect to

invest a portion of our portfolio in opportunistic investments, which are not our primary focus, but are intended to enhance our risk-adjusted returns to stockholders.

These investments may include, but are not limited to, securities of public

companies and debt and equity securities of companies located outside of the United States.

While our primary investment objective is to

maximize current income and capital appreciation through investments in U.S.

senior and subordinated loans, other debt securities and equity, we may also invest a portion of the portfolio in opportunistic investments, including foreign securities.

Listed below are our top ten portfolio companies and industries based on their fair value and represented as a percentage of total assets

as of December 31, 2019 and December 31, 2018:

We may also invest in other industries if we are presented with attractive opportunities.

We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds.

may also participate in negotiated co-investment transactions with certain affiliates, each of whose investment adviser is Solar Capital Partners, or an investment adviser controlling, controlled by or under

common control with Solar Capital Partners and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the Advisers Act), in a manner consistent with our investment objective, positions, policies,

strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to the conditions of the most recent exemptive order obtained from the SEC on June 13, 2017 (the Exemptive Order).

the Exemptive Order, we are permitted to co-invest with our affiliates if a required majority (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain

conclusions in connection with a co-investment transaction, including, but not limited to,

that (1) the terms of the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to us and our

stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the potential co-investment transaction is consistent with the

interests of our stockholders and is consistent with our then-current investment objective and strategies.

At December 31, 2020, our

portfolio consisted of 105 portfolio companies and was invested 18.8% in cash flow senior secured loans, 27.0% in asset-based senior secured loans / Crystal Financial LLC (Crystal), 14.2% in Kingsbridge Holdings LLC (KBH),

18.6% in equipment senior secured financings / NEF Holdings, LLC (NEF), and 21.4% in life science senior secured loans, in each case, measured at fair value.

We expect that our portfolio will continue to include primarily senior secured,

stretch-senior, financing leases and to a lesser extent, unsecured loans and equity securities.

In addition, we also expect to invest a portion of our portfolio in opportunistic investments, which are not our primary focus, but are intended to

enhance our risk-adjusted returns to stockholders.

These investments may include, but are not limited to, securities of public companies and debt and equity securities of companies located outside of the United States.

While our primary investment objective is to maximize current income and capital appreciation through investments in U.S.

subordinated loans, other debt securities and equity, we may also invest a portion of the portfolio in opportunistic investments, including foreign securities.

Listed below are our top ten portfolio companies and industries based on their fair value and represented as a percentage of total assets as

of December 31, 2020 and December 31, 2019:

TOP TEN PORTFOLIO COMPANIES AND INDUSTRIES AS OF DECEMBER 31, 2020

1 unchanged sentence

Crystal Financial LLC*

Kingsbridge Holdings, LLC*

NEF Holdings, LLC*

GenMark Diagnostics, Inc.

Falmouth Group Holdings Corp.

Rubius Therapeutics, Inc.

KORE Wireless Group, Inc.

Varilease Finance, Inc.

Kingsbridge Holdings, LLC

PhyMed Management LLC

MRI Software, Inc.

Equipment Operating Leases LLC*

Cardiva Medical, Inc.

Pet Holdings ULC & Pet Supermarket Inc.

Denotes investments in which we are deemed to exercise a controlling influence over the management or policies

of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment.

Diversified Financial Services

Multi-Sector Holdings

Diversified Financial Services

Health Care Providers & Services

2 unchanged sentences

Commercial Services & Supplies

Specialty Retail

Wireless Telecommunication Services

Communications Equipment

TOP TEN PORTFOLIO COMPANIES AND INDUSTRIES AS OF DECEMBER 31, 2019

2 unchanged sentences

NEF Holdings, LLC*

Genmark Diagnostics, Inc.

Falmouth Group Holdings Corp.

1 unchanged sentence

Varilease Finance, Inc.

Equipment Operating Leases LLC*

Kingsbridge Holdings, LLC

PhyMed Management LLC

American Teleconferencing Services, Ltd.

Pet Holdings ULC & Pet Supermarket, Inc.

PSKW, LLC & PDR, LLC

MRI Software, Inc.

Equipment Operating Leases LLC*

Denotes investments in which we are deemed to exercise a controlling influence over the management or policies

5 unchanged sentences

Health Care Equipment & Supplies

Commercial Services & Supplies

Wireless Telecommunication Services

Communications Equipment

Set forth below is a brief description of each portfolio company in which we have made an investment that

1 unchanged sentence

Crystal Financial LLC

Crystal Financial LLC is an independent commercial finance company that provides primarily senior secured loans for both asset-based and cash

flow financings to middle-market companies.

experienced, responsive professionals has underwritten, closed and managed more than $20 billion in secured debt commitments across a wide range of industries.

As of December 31, 2019,

Crystal Financial LLC had 35 funded commitments to 28 different issuers with total funded loans of approximately $496.8 million on total assets of $520.0 million.

Crystals competitors include other specialty finance companies and

We currently hold Crystal Financial LLC is an independent commercial finance company that provides primarily senior secured loans for both

asset-based and cash flow financings to middle-market companies.

Its team of experienced, responsive professionals has underwritten, closed and managed more than $20 billion in secured debt commitments across a wide range of industries.

December 31, 2020, Crystal Financial LLC had 30 funded commitments to 24 different issuers with total funded loans of approximately $404.1 million on total assets of $433.9 million.

Crystals competitors include other specialty

finance companies and small banks.

As with any lender, Crystal is exposed to interest rate risk, which it mostly mitigates by issuing loans with floating rates.

Holdings, LLC

On July 31, 2017, the Company completed the acquisition of NEF Holdings, which conducts its business through its

wholly-owned subsidiary Nations Equipment Finance, LLC.

NEF Holdings is an independent equipment finance company that provides senior secured loans and leases primarily to U.S.

NEF Holdings, LLC

On July 31, 2017,

the Company completed the acquisition of NEF Holdings, which conducts its business through its wholly-owned subsidiary Nations Equipment Finance, LLC.

NEF Holdings is an independent equipment finance company that provides senior secured loans and

leases primarily to U.S.

based companies.

The Company invested $209.9 million in cash to

effect the transaction, of which $145.0 million was invested in the equity of NEF Holdings through our wholly-owned consolidated taxable subsidiary NEFCORP LLC and our wholly-owned consolidated subsidiary NEFPASS LLC and $64.9 million was

used to purchase certain leases and loans held by NEF Holdings through NEFPASS LLC.

The Company invested $209.9 million in cash to effect the transaction, of which $145.0 million was invested in

the equity of NEF Holdings through our wholly-owned consolidated taxable subsidiary NEFCORP LLC and our wholly-owned consolidated subsidiary NEFPASS LLC and $64.9 million was used to

purchase certain leases and loans held by NEF Holdings through NEFPASS LLC.

At July 31, 2017, NEF Holdings also had two securitizations outstanding, with an issued note balance of $94.6 million, which were later redeemed in 2018.

As of December 31, 2019, NEF had 168 funded equipment-backed leases and loans to 78 different customers with a total net investment in leases and loans of approximately $245.0 million on total assets of $304.2 million.

December 31, 2020, NEF had 138 funded equipment-backed leases and loans to 61 different customers with a total net investment in leases and loans of approximately $188.5 million on total assets of $263.4 million.

Kingsbridge Holdings, LLC

November 3, 2020, the Company acquired 87.5% of Kingsbridge Holdings, LLC (KBH) through KBH Topco LLC (KBHT), a newly formed Delaware corporation.

KBH is a residual focused independent

mid-ticket lessor of equipment primarily to U.S.

investment grade companies.

The Company invested $216.6 million to effect the transaction, of which $136.6 million was invested to acquire 87.5% of

KBHTs equity and $80.0 million in KBHs debt.

The existing management team of KBH committed to continue to lead KBH after the transaction.

Post the transaction, the Company owns 87.5% of KBHT equity and the KBH management team owns the

remaining 12.5% of KBHTs equity.

As of December 31, 2020, KBHT had total assets of $744.7 million.

Investment Selection Process

Capital Partners is committed to and utilizes a value-oriented investment philosophy with a focus on the preservation of capital and a commitment to managing downside exposure.

Solar Capital Partners is committed to and utilizes a value-oriented investment philosophy with a focus on the preservation of capital

and a commitment to managing downside exposure.

Portfolio Company Characteristics

3 unchanged sentences

Stable Earnings and Strong Free Cash Flow.

We seek to invest in companies who have demonstrated stable earnings

through economic cycles.

We seek to invest in companies who have demonstrated stable earnings through economic cycles.

We target companies that can de-lever through consistent generation of cash flows rather than relying solely on growth to service and repay our loans.

14 unchanged sentences

Diversified Customer and Supplier Base.

We seek to invest in businesses that

have a diversified customer and supplier base.

We believe that companies with a diversified customer and supplier base are generally better able to endure economic downturns, industry consolidation, changing business preferences and other factors

that may negatively impact their customers, suppliers and competitors.

We seek to invest in businesses that have a diversified

customer and supplier base.

We believe that companies with a diversified customer and supplier base are generally better able to endure economic downturns, industry consolidation, changing business preferences and other factors that may negatively

impact their customers, suppliers and competitors.

Exit Strategy.

We predominantly invest in companies

which provide multiple alternatives for an eventual exit.

We predominantly invest in companies which provide multiple

alternatives for an eventual exit.

We look for opportunities that provide an exit typically within three years of the initial capital commitment.

71 unchanged sentences

companys capital structure.

Solar Capital seeks to create a diverse portfolio that includes senior secured loans, stretch-senior

loans and to a lesser extent, unsecured loans and equity securities by investing approximately $5 million to $100 million of capital.

With respect to our senior secured loans, we seek to obtain security interests in the assets of our

portfolio companies that serve as collateral in support of the repayment of these loans.

Solar Capital seeks to create a diverse portfolio that includes senior secured loans,

stretch-senior loans and to a lesser extent, unsecured loans and equity securities by investing approximately $5 million to $100 million of capital.

With respect to our senior secured loans, we seek to obtain security interests in the

assets of our portfolio companies that serve as collateral in support of the repayment of these loans.

This collateral may take the form of first or second priority liens on the assets of a portfolio company.

32 unchanged sentences

Solar Capital Partners monitors our portfolio companies on an ongoing basis.

Solar Capital Partners monitors the financial trends of each

portfolio company to determine if it is meeting its business plan and to assess the appropriate course of action for each company.

Capital Partners has several methods of evaluating and monitoring the performance and fair value of our investments, which include the following:

Solar Capital Partners monitors the financial trends

of each portfolio company to determine if it is meeting its business plan and to assess the appropriate course of action for each company.

Solar Capital Partners has several methods of evaluating and monitoring the performance and

fair value of our investments, which include the following:

Assessment of success in adhering to each portfolio companys business plan and compliance with covenants;

26 unchanged sentences

We attempt to obtain market quotations from at least two brokers or dealers (if available, otherwise from a principal market maker or a primary market dealer or other independent pricing service).

utilize mid-market pricing as a practical expedient for fair value unless a different point within the range is more

representative.

If and when market quotations are deemed not to represent fair value, we may utilize independent third-party valuation firms to assist us in determining the fair value of material

utilize mid-market pricing as a practical expedient for fair value unless a different point within the range is more representative.

If and when market quotations are deemed not to represent fair value, we may

utilize independent third-party valuation firms to assist us in determining the fair value of material assets.

Accordingly, such investments go through our multi-step valuation process as described below.

In each case, independent valuation firms consider observable market inputs together with significant unobservable inputs in arriving at their

In each case, independent valuation firms

consider observable market inputs together with significant unobservable inputs in arriving at their

valuation recommendations.

Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of

the Investment Adviser, does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under the direction of our Board.

Investments that are not publicly traded or whose market

quotations are not readily available are valued at fair value as determined in good faith by or under the direction of our Board.

Such determination of fair values involves subjective judgments and estimates.

With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent

fair value, our Board has approved a multi-step valuation process each quarter, as described below:

Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus amortized premium, which is expected to approximate

fair value, unless such valuation, in the judgment of the Investment Adviser, does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under the direction of our Board.

that are not publicly traded or whose market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of our Board.

Such determination of fair values involves subjective judgments and

With respect to investments for which market quotations are not readily available or when such market quotations are deemed

not to represent fair value, our Board has approved a multi-step valuation process each quarter, as described below:

our quarterly valuation process begins with each portfolio company or investment being initially valued by the

22 unchanged sentences

For the fiscal year ended December 31, 2020, there has been no change to the Companys valuation approaches or techniques and the nature of the related inputs considered in the valuation process.

Accounting Standards Codification (ASC) Topic 820 classifies the inputs used to

measure these fair values into the following hierarchy:

Quoted prices in active markets for identical

assets or liabilities, accessible by the Company at the measurement date.

Quoted prices for similar

assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Accounting Standards Codification (ASC) Topic 820 classifies the inputs used to measure these fair values into the following

Quoted prices in active markets for identical assets or liabilities, accessible by the

Company at the measurement date.

Quoted prices for similar assets or liabilities in active

markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Unobservable inputs for the asset or liability.

33 unchanged sentences

Peteka, our Chief Financial Officer, Treasurer and Secretary serves as the

Financial Officer for Solar Capital Partners.

Guy Talarico, our Chief Compliance Officer, is the Chief Executive Officer of Alaric Compliance Services, LLC, and performs his functions as our

Chief Compliance Officer under the terms of an agreement between Solar Capital Management and Alaric Compliance Services, LLC.

Chief Financial Officer for Solar Capital Partners.

Guy Talarico, our Chief Compliance Officer, is the Chief Executive Officer of Alaric Compliance Services, LLC, and performs his functions as our Chief Compliance Officer under the terms of an

agreement between Solar Capital Management and Alaric Compliance Services, LLC.

Solar Capital Management has retained Mr.

Talarico and Alaric Compliance Services, LLC pursuant to its obligations

under our Administration Agreement.

Our day-to-day

investment operations are managed by Solar Capital Partners.

Talarico and Alaric Compliance Services, LLC pursuant to its obligations under our Administration Agreement.

day-to-day investment operations are managed by Solar Capital Partners.

Based upon its needs, Solar Capital Partners may hire additional investment professionals.

In addition, we will reimburse Solar Capital Management for the allocable portion of overhead and

other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, and the allocable portion of the cost of the companys chief compliance officer and chief financial officer and their respective

addition, we will reimburse Solar Capital Management for the allocable portion of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, and the allocable portion of the cost of

the companys chief compliance officer and chief financial officer and their respective staffs.

Sarbanes-Oxley Act of 2002

27 unchanged sentences

nature of our business.

As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive

regulatory requirements.

As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory

requirements.

A majority of our directors must be persons who are not interested persons, as that term is defined in the 1940 Act.

Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance

company to protect the BDC.

Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the

duties involved in the conduct of such persons office.

As a BDC, we are required to meet an asset coverage ratio, reflecting the

value of our total assets to our total senior securities, which include all of our borrowings and any preferred stock we may issue in the future, of at least 150%.

We may also be prohibited under the 1940 Act from knowingly participating in certain

transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC.

Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to

protect the BDC.

involved in the conduct of such persons office.

As a BDC, we are required to meet an asset coverage ratio, reflecting the value of our total

assets to our total senior securities, which include all of our borrowings and any preferred stock we may issue in the future, of at least 150%.

We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with

our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC.

We are generally not able to issue and sell our common stock at a price below net asset value per share without annual stockholder approval.

6 unchanged sentences

As a BDC, we were substantially limited in our ability to co-invest in privately negotiated

transactions with affiliated funds until we obtained an exemptive order from the SEC on July 28, 2014 (the Prior Exemptive Order).

The Prior Exemptive Order permitted us to participate in negotiated

co-investment transactions with certain affiliates, each of whose investment adviser was Solar Capital Partners, in a manner consistent with our investment objective, positions, policies, strategies and

restrictions as well as regulatory requirements and other pertinent factors, and pursuant to the conditions to the Prior Exemptive Order.

On June 13, 2017, the Company, Solar Senior Capital Ltd., and Solar Capital Partners, et al., received an

exemptive order that supersedes the Prior Exemptive Order (the New Exemptive Order) and extends the relief granted in the Prior Exemptive Order such that it no longer applies to certain affiliates only if their respective investment

adviser is Solar Capital Partners, but also applies to certain affiliates whose investment adviser is an investment adviser that controls, is controlled by or is under common control with Solar Capital Partners and is registered as an investment

adviser under the Advisers Act.

The terms and conditions of the New Exemptive Order are otherwise substantially similar to the Prior Exemptive Order.

If we are unable to rely on the New Exemptive Order for a particular opportunity, such opportunity

will be allocated first to the entity whose investment strategy is the most consistent with the opportunity being allocated, and second, if the terms of the opportunity are consistent with more than one entitys investment strategy, on an

alternating basis.

Although our investment professionals will endeavor to allocate investment opportunities in a fair and equitable manner, we and our common stockholders could be adversely affected to the extent investment opportunities are

allocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors and members of our investment adviser.

We will be periodically examined by the SEC for compliance with the federal securities laws, including the 1940 Act.

transactions with affiliated funds until we obtained an exemptive order from the SEC.

The most recent exemptive order, received on June 13, 2017 (the Exemptive Order), permits us to participate in negotiated co-investment transactions with certain affiliates, each of whose investment adviser is an investment adviser that controls, is controlled by or is under common control with Solar Capital Partners and is registered

as an investment adviser under the Advisers Act, in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to the conditions to

the Exemptive Order.

If we are unable to rely on the Exemptive Order for a particular opportunity, such opportunity will be allocated first to the entity whose investment strategy is the most consistent with the opportunity being allocated, and

second, if the terms of the opportunity are consistent with more than one entitys investment strategy, on an alternating basis.

Although our investment professionals will endeavor to allocate investment opportunities in a fair and equitable

manner, we and our common stockholders could be adversely affected to the extent investment opportunities are allocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors and members

of our investment adviser.

We will be periodically examined by the SEC for compliance with the federal securities laws, including the

Qualifying Assets

2 unchanged sentences

The principal categories of qualifying assets relevant to our business are the following:

(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain

limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed

(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to

certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be

prescribed by the SEC.

An eligible portfolio company is defined in the 1940 Act as any issuer which:

(a) is organized under the laws

of, and has its principal place of business in, the United States;

(b) is not an investment company (other than a small

business investment company wholly owned by the BDC);

(a) is organized

under the laws of, and has its principal place of business in, the United States;

(b) is not an investment company (other

than a small business investment company wholly owned by the BDC);

21 unchanged sentences

partners held by a BDC as payment for securities of such company issued in connection with an executive compensation plan described in Section 57(j) of the 1940 Act.

Under Section 55(b) of the 1940 Act, the value of a BDCs assets shall be

determined as of the date of the most recent financial statements filed by such company with the SEC pursuant to Section 13 of the 1934 Act, and shall be determined no less frequently than annually.

Under Section 55(b) of the 1940 Act, the value of a BDCs assets shall be determined as of the date of the most recent financial

statements filed by such company with the SEC pursuant to Section 13 of the 1934 Act, and shall be determined no less frequently than annually.

Significant Managerial Assistance to Portfolio Companies

24 unchanged sentences

our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase.

We may also borrow amounts up to 5% of the value of our total assets for temporary or

emergency purposes without regard to asset coverage.

We may also borrow amounts up to 5% of the value of our total assets for temporary

purposes without regard to asset coverage.

We may borrow money, which would magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us.

18 unchanged sentences

The guidelines are reviewed periodically by the adviser and our non-interested directors, and, accordingly, are subject to change.

As an investment adviser registered under the Advisers Act, Solar Capital Partners has a fiduciary duty to act solely in the best interests of

As an investment adviser registered under the Advisers Act, Solar Capital Partners has a

fiduciary duty to act solely in the best interests of its clients.

As part of this duty, it recognizes that it must vote securities held by its clients in a timely manner free of conflicts of interest.

These policies and procedures for voting proxies for investment advisory clients are intended to

comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.

Our investment

adviser votes proxies relating to our portfolio securities in the best interest of our stockholders.

Solar Capital Partners reviews on a case-by-case basis each proposal

submitted for a proxy vote to determine its impact on our investments.

Although it generally votes against proposals that may have a negative impact on our investments, it may vote for such a proposal if there exists compelling long-term reasons to

The proxy voting decisions of our investment adviser are made by the senior investment professionals who are responsible for monitoring each of our investments.

To ensure that our vote is not the product of a conflict of interest, it requires

(i) anyone involved in the decision making process disclose to a managing member of Solar Capital Partners any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a

and (ii) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties.

You may obtain information about how we voted proxies by making a written request for proxy voting information to:

These policies and procedures for voting

proxies for investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.

Our investment adviser votes proxies relating to our portfolio securities in the best interest of our stockholders.

Solar Capital Partners

LLC, 500 Park Avenue, New York, NY 10022.

reviews on a case-by-case basis each proposal submitted for a proxy vote to determine its impact on our investments.

Although it generally votes against proposals that

may have a negative impact on our investments, it may vote for such a proposal if there exists compelling long-term reasons to do so.

The proxy voting decisions of our investment adviser are made by the senior investment professionals who are

responsible for monitoring each of our investments.

To ensure that our vote is not the product of a conflict of interest, it requires that:

(i) anyone involved in the decision making process disclose to a managing member of Solar Capital

Partners any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote;

and (ii) employees involved in the decision making process or vote administration are prohibited

from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties.

You may obtain

information about how we voted proxies by making a written request for proxy voting information to:

Solar Capital Partners, LLC, 500 Park Avenue, New York, NY 10022.

Privacy Principles

We are committed to maintaining the privacy of our stockholders and to safeguarding their non-public

personal information.

The following information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.

Generally, we do not receive any non-public personal information relating to our stockholders,

although certain non-public personal information of our stockholders may become available to us.

We do not disclose any non-public personal information about our

stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third party administrator).

We restrict access to non-public personal information about our stockholders to employees of our

investment adviser and its affiliates with a legitimate business need for the information.

We maintain physical, electronic and procedural safeguards designed to protect the non-public personal information of

our stockholders.

We are committed to

maintaining the privacy of our stockholders and to safeguarding their non-public personal information.

The following information is provided to help you understand what personal information we may have access

to, how we protect that information and why, in certain cases, we may share such information with select other parties.

Generally, we do

not receive any non-public personal information relating to our stockholders, although certain non-public personal information of our stockholders may become available

We do not disclose any non-public personal information about our stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts

(for example, through a transfer agent or proxy solicitor).

We restrict access to non-public

personal information about our stockholders to employees of our investment adviser and its affiliates with a legitimate business need for the information.

We maintain physical, electronic and procedural safeguards designed to protect the non-public personal information of our stockholders.

Taxation as a Regulated Investment Company

2 unchanged sentences

have to pay corporate-level U.S.

federal income taxes on any ordinary

income or capital gains that we distribute to our stockholders as dividends.

federal income taxes on any ordinary income or capital gains that we timely distribute to our stockholders as dividends.

To continue to qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below).

In addition, to qualify for RIC tax treatment we must distribute to our stockholders, for each taxable year, at least 90% of our

investment company taxable income, which generally is our ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses (the Annual Distribution Requirement).

we qualify as a RIC and satisfy the Annual Distribution Requirement, then we will not be subject to U.S.

federal income tax on the portion of our investment company taxable income and net capital gain (i.e., realized net long-term capital gains in

excess of realized net short-term capital losses) we distribute (or are deemed to distribute) to stockholders.

In addition, to qualify for RIC tax treatment we must distribute to our stockholders, for each

taxable year, at least 90% of our investment company taxable income, which generally is our ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses (the Annual

Distribution Requirement).

If we qualify as a RIC and satisfy the Annual Distribution Requirement, then we will not be subject to U.S.

federal income tax on the portion of our investment company taxable income and net capital gain (i.e.,

realized net long-term capital gains in excess of realized net short-term capital losses) we distribute (or are deemed to distribute) to stockholders.

We will be subject to U.S.

federal income tax at the regular corporate rates on any income or capital gain not distributed (or deemed not

distributed) to our stockholders.

federal income tax at the regular corporate rates on any ordinary

income or capital gain not distributed (or deemed not distributed) to our stockholders.

We will be subject to a 4% nondeductible U.S.

federal excise tax on certain undistributed income unless

we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one-year period ending

October 31 in that calendar year and (3) any income realized, but not distributed, and on which we paid no U.S.

federal income tax, in preceding years (the Excise Tax Avoidance Requirement).

federal excise tax on certain undistributed

income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one-year

period ending October 31 in that calendar year and (3) any ordinary income and net capital gains that we recognized in preceding years, but were not distributed during such years, and on which we paid no U.S.

federal income tax (the

Excise Tax Avoidance Requirement).

In order to qualify as a RIC for U.S.

federal income tax purposes, we must, among other things:

federal income tax purposes, we must, among other

at all times during each taxable year, have in effect an election to be treated as a BDC under the 1940 Act;

21 unchanged sentences

Certain of our investment practices may be subject to special and complex U.S.

income tax provisions that may, among other things:

federal income tax provisions that may, among other things:

(i) disallow, suspend or otherwise limit the allowance of certain losses or deductions;

(ii) convert lower taxed long-term capital gain into higher taxed short-term capital gain or

ordinary income;

(iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited);

(ii) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income;

(iii) convert an ordinary loss or a

deduction into a capital loss (the deductibility of which is more limited);

(iv) cause us to recognize income or gain without a corresponding receipt of cash;

(v) adversely affect

the time as to when a purchase or sale of securities is deemed to occur;

(v) adversely affect the time as to when a purchase or sale of securities is

deemed to occur;

(vi) adversely alter the characterization of certain complex financial transactions;

and (vii) produce income that will not be qualifying income for purposes of the

90% gross income test described above.

We will monitor our transactions and may make certain tax elections in order to mitigate the potential adverse effect of these provisions.

Gain or loss realized by us from the sale or exchange of warrants acquired by us as well as any loss attributable to the lapse of such

warrants generally will be treated as capital gain or loss.

and (vii) produce income that will not be qualifying income for purposes of the 90% gross income test described above.

We will monitor

our transactions and may make certain tax elections in order to mitigate the potential adverse effect of these provisions.

Gain or loss realized by us from the sale or exchange of warrants acquired by us as well as

any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss.

The treatment of such gain or loss as long-term or short-term will depend on how long we held a particular warrant.

Upon the exercise of a warrant acquired by us, our tax basis in the stock

purchased under the warrant will equal the sum of the amount paid for the warrant plus the strike price paid on the exercise of the warrant.

to Qualify as a Regulated Investment Company

Upon the exercise of a warrant

acquired by us, our tax basis in the stock purchased under the warrant will equal the sum of the amount paid for the warrant plus the strike price paid on the exercise of the warrant.

Failure to Qualify as a Regulated Investment Company

If we were unable to qualify for treatment as a RIC, we would be subject to U.S.

income tax on all of our taxable income at regular corporate rates.

federal income tax on all of our taxable income at regular

corporate rates.

We would not be able to deduct distributions to stockholders, nor would they be required to be made.

Such distributions would be taxable to our stockholders as dividends and,

provided certain holding period and other requirements were met, could qualify for treatment as qualified dividend income in the hands of non-corporate stockholders (and thus eligible for the

current 20% maximum rate) to the extent of our current and accumulated earnings and profits.

Such distributions would be taxable to our stockholders as dividends and, provided certain holding period and other

requirements were met, could qualify for treatment as qualified dividend income in the hands of non-corporate stockholders (and thus eligible for the current 20% maximum rate) to the extent of our

current and accumulated earnings and profits.

Subject to certain limitations under the Code, corporate distributees would be eligible for the dividends received deduction.

Distributions in excess of our

current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholders tax basis, and any remaining distributions would be treated as a capital gain.

To requalify as a RIC in a subsequent

taxable year, we would be required to satisfy the RIC qualification requirements for that year and dispose of any earnings and profits from any year in which we failed to qualify as a RIC.

Subject to a limited exception applicable to RICs that

qualified as such under Subchapter M of the Code for at least one year prior to disqualification and that requalify as a RIC no later than the second year following the non-qualifying year, we could be subject

to tax on any unrealized net built-in gains in the assets held by us during the period in which we failed to qualify as a RIC that are recognized within the subsequent 5 years, unless we made a special

election to pay corporate-level U.S.

Distributions in excess of our current and accumulated earnings and profits

would be treated first as a return of capital to the extent of the stockholders tax basis, and any remaining distributions would be treated as a capital gain.

To requalify as a RIC in a subsequent taxable year, we would be required to satisfy

the RIC qualification requirements for that year and dispose of any earnings and profits from any year in which we failed to qualify as a RIC.

Subject to a limited exception applicable to RICs that qualified as such under Subchapter M of the Code

for at least one year prior to disqualification and that requalify as a RIC no later than the second year following the non-qualifying year, we could be subject to tax on any unrealized net built-in gains in the assets held by us during the period in which we failed to qualify as a RIC that are recognized within the subsequent 5 years, unless we made a special election to pay corporate-level U.S.

federal income tax on such built-in gain at the time of our requalification as a RIC.

Investment Advisory Fees

Pursuant to an

investment advisory and management agreement (the Advisory Agreement), we have agreed to pay Solar Capital Partners a fee for investment advisory and management services consisting of two components a base management fee and a

performance-based incentive fee.

The base management fee is determined by taking the average value of Solar Capitals gross assets

at the end of the two most recently completed calendar quarters calculated at an annual rate of 1.75% on gross assets up to 200% of the Companys total net assets as of the immediately preceding quarter end and 1.00% on gross assets that

exceed 200% of the Companys total net assets as of the immediately preceding quarter end.

For purposes of computing the base management fee, gross assets exclude temporary assets acquired at the end of each fiscal quarter for purposes of

preserving investment flexibility in the next fiscal quarter.

Pursuant to an investment advisory and management agreement (the Advisory Agreement), we have agreed to pay Solar Capital

Partners a fee for investment advisory and management services consisting of two components a base management fee and a performance-based incentive fee.

The base management fee is determined by taking the average value of Solar Capitals gross assets at the end of the two

most recently completed calendar quarters calculated at an annual rate of 1.75% on gross assets up to 200% of the Companys total net assets as of the immediately preceding quarter end and 1.00% on gross assets that exceed 200% of the

Companys total net assets as of the immediately preceding quarter end.

For purposes of computing the base management fee, gross assets exclude temporary assets acquired at the end of each fiscal quarter for purposes of preserving investment

flexibility in the next fiscal quarter.

Temporary assets include, but are not limited to, U.S.

4 unchanged sentences

For this purpose, pre-incentive fee net investment income means interest income,

dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence

and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee,

expenses payable under the Administration Agreement to Solar Capital Management, and any interest expense and dividend paid on any issued and outstanding preferred stock, but excluding the performance-based incentive fee).

Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay in kind interest and zero coupon securities),

accrued income that we have not yet received in cash.

Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital

dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies)

accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement to Solar Capital Management, and any interest expense and dividend paid on any

issued and outstanding preferred stock, but excluding the performance-based incentive fee).

Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such

as original issue discount, debt instruments with pay in kind interest and zero coupon securities), accrued income that we have not yet received in cash.

Pre-incentive fee net investment income does not

include any realized capital gains, computed net of all realized capital losses or unrealized capital

appreciation or depreciation.

Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a

hurdle of 1.75% per quarter (7.00% annualized).

Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 1.75% base management fee.

We pay Solar Capital

Partners an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the

immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized).

Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to

calculate the 1.75% base management fee.

We pay Solar Capital Partners an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

no performance-based incentive fee in any calendar quarter in which our

6 unchanged sentences

20% of the amount of our pre-incentive fee net investment income, if any,

that exceeds 2.1875% in any calendar quarter (8.75% annualized) is payable to Solar Capital Partners (once the hurdle is reached and the catch-up is achieved, 20% of all

pre-incentive fee investment income thereafter is allocated to Solar Capital Partners).

The following is a graphical representation of the calculation of the income-related portion of the performance-based incentive fee:

that exceeds 2.1875% in any calendar quarter (8.75% annualized) is payable to Solar Capital Partners (once the hurdle is reached and the catch-up is achieved, 20% of all pre-incentive fee investment income

thereafter is allocated to Solar Capital Partners).

The following is a graphical representation of the calculation of

the income-related portion of the performance-based incentive fee:

Quarterly Incentive Fee Based on Net Investment Income

84 unchanged sentences

$1.4 million capital gains incentive fee (1)

$6.4 million (20% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million

unrealized capital depreciation)) less $5 million capital gains fee received in Year 2

$5 million (20% multiplied by $25 million (cumulative realized capital gains of $35 million

less realized capital losses of $10 million)) less $6.4 million cumulative capital gains fee paid in Year 2 and Year 3

$6.4 million (20% multiplied by $32 million ($35 million cumulative realized capital gains

less $3 million unrealized capital depreciation)) less $5 million capital gains fee received in Year 2

$5 million (20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses of $10 million)) less

$6.4 million cumulative capital gains fee paid in Year 2 and Year 3

As illustrated in Year 3 of Alternative 2 above, if Solar Capital were to be wound up on a date other than

34 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business